In a transition economy, the government begins to reduce its control over the economy, allowing private enterprise to play a greater role in economic activities. This often involves privatizing state-owned enterprises, deregulating markets, and reducing trade barriers to increase competition and encourage foreign investment.

The transition process can be difficult and challenging, as the economy must adapt to new market forces and the government must learn to operate in a new regulatory environment. This can lead to short-term economic instability, with fluctuations in employment, inflation, and economic growth.

Transition economies have been studied extensively by economists, as they provide a unique opportunity to observe the effects of policy changes on economic outcomes. Many countries in Central and Eastern Europe, as well as some countries in Asia and Africa, have undergone transition processes in recent decades. The success of these transitions has varied widely, with some countries achieving rapid economic growth and increased prosperity, while others have struggled with high unemployment and social unrest.